Sunak warns of bill to be paid to tackle UK’s ‘exposed’ finances
In an interview with the FT, the Chancellor has said Britain’s finances are “exposed” to rising interest rates and the public need to be told the truth about the challenges facing the country. Meanwhile, a Treasury decision to hold a “tax day” three weeks after the Budget will be a bellwether for long-term changes in government policy, experts have said. Separately, Conservative party doners have warned Rishi Sunak that raising taxes in his Budget would be “utterly wrong” and risk sending Britain into another recession. Property developer Steve Morgan said: “One of the advantages of leaving the EU is that we can become a low-tax, dynamic society which can become Europe’s go-to country for investment. Increasing corporation tax and CGT flies in the face of this.” Banker Sir Henry Angest was particularly blunt, adding: “I suspect there is a mindset at the Treasury that just doesn’t believe in the capitalist economic model.”
The Times talks to accountants about the effect freezing tax thresholds would have on workers following speculation the Chancellor could use the tool in his Budget. PwC said that a 2% increase in wages would push the income of 1% of the working population over the £50,000 threshold. With 32m people in work, this would mean an extra 320,000 paying 40% tax on some income. If income tax thresholds were frozen until the next election, the average family would be £250 a year worse off by 2024-25. Pay rises for those who earn close to the £12,500 personal allowance could tip some of their earnings into the 20% tax zone – another blow for those who have suffered the most from the pandemic. Zena Hanks, an analyst from Saffery Champness, said: “The less that you earn, the more a frozen allowance will influence your take-home pay, so some may consider this a highly inequitable way of increasing tax revenue.”
The Times, Page: 60
Higher business taxes cost us all
The Telegraph’s Matthew Lynn reminds readers that a hike in corporation tax will ultimately mean higher prices and pay cuts for workers. He states: “Sure, the crisis needs to be paid for, but we need to do that with long-term restructuring of the national debt, by rethinking the role of the state and with faster growth – not with panicky tax rises on the one part of the economy that might lead us out of this mess.” Meanwhile, a poll for the paper reveals that nearly 60% of Tory voters polled said they supported an increase in corporation tax to help pay for the Government’s pandemic and recovery spending. Half said CGT should remain the same, 34% stated it should increase and just 16% think it should decrease. Elsewhere, the i suggests the Chancellor will leave tax rises for the autumn and focus on job support instead in his Budget on Wednesday.
Pandemic losers could cut future tax bills while Covid boomers pay more
Treasury officials have reportedly considered increasing corporation taxes on businesses that profited during the pandemic while expanding the so-called loss carry-back rules, which allow firms which previously made a loss to cut their tax bills when they return to profit. Chris Sanger, head of tax at EY, said: “If you’re incurring losses and you’ve got the history of taxable profits, then the banks can be pretty assured that you’re going to be able to get relief for those losses as you incur them. This would be quite an attractive move in order to help those kind of businesses move forward.” Ministers are also considering a shake-up of research and development (R&D) tax credits to help spur investment by firms after the pandemic.
Corbyn loyalists warn of Budget tax trap for Labour
Allies of Jeremy Corbyn have warned his successor that failure to back an increase in corporation tax in next week’s Budget would cost the Labour party dearly. Sir Keir Starmer has faced anger on the Labour left after he told MPs it was not the right time for tax rises on families and businesses.
The I, Page: 8
Chancellor considers tax raid on parcels and freelance workers
The Sunday Telegraph reports that the Chancellor will launch a series of consultations later in the month on tax increases to pay for the cost of the pandemic, including new levies on online retail including for internet deliveries and an increase in National Insurance Contributions paid by the self-employed. Treasury sources said Mr Sunak’s concerns about the different tax treatment of the employed and self-employed have not changed since his first Budget last March. The consultations will be launched on March 23rd – dubbed “tax day” in Whitehall. The Sunday Times runs over some of Rishi Sunak’s fundraising plans, including freezing income tax thresholds and hiking corporation tax rises, both of which are approved of by Mike Brewer, chief economist at the Resolution Foundation, who says the measures “would have the triple benefit of raising about £16bn a year by 2025, while also protecting families that have been hit hardest by the crisis, and not holding back the recovery.” The CBI is less than impressed with proposals to increase taxes on businesses, however, with its chief economist Rain Newton-Smith stating that any rise should wait until after the economy has recovered.
Tories to blame for 1,000 tax rises in the last ten years
Research by the TaxPayers’ Alliance shows Conservative prime ministers have pushed through more than 1,034 tax rises over the past decade. A total of 1,651 tax changes were made since 2010 with VAT, vehicle excise duty and Income Tax seeing the most adjustment. Income Tax was changed 180 times, going up 61 times while cuts were made 119 times. The Alliance is calling for a recovery budget on Wednesday, giving taxpayers a respite from rises. John O’Connell, chief executive of the Alliance, said: “The tax burden is at a 70-year high, and it’s not hard to see why after a decade of tax increases. All too often we’ve seen Conservative chancellors give with one hand but take back a good deal more with the other, meaning every aspect of every-day life comes with a sizeable tax bill.” Meanwhile, former Tory Chancellor Lord Ken Clark has said Rishi Sunak should not be afraid to raise income tax, VAT or national insurance because people would understand that when the Tory manifesto was written the pandemic could not have been predicted.
The Sunday Telegraph, Page: 2 The Sunday Express The Independent
Return deadline tonight
Self-assessment taxpayers have until midnight tonight, February 28th, to file their return and avoid a £100 fine. The deadline to submit tax returns for 2019/20 was January 31 but HMRC waived the late filing fine as long as they are submitted by February 28.
The Sun on Sunday
CORPORATE NEWS – WEEKEND TO 28TH FEBRUARY 2021
New ‘shareholder spring’ looms for companies tapping furlough scheme
Fidelity International has joined the Investment Association in calling for companies that used schemes such as furlough without repaying the money to show restraint when it comes to executive pay this year. “We are communicating that this is a red-line policy,” said Jenn-Hui Tan, Fidelity’s global head of stewardship. The Sunday Times notes that rows over taxpayer funds have already led to Tesco paying back £585m in business rates relief and BDO giving back £4.1m of furlough cash. In a letter to FTSE 350 companies the pension fund manager says it expects “companies that have participated in taxpayer-supported staff furlough schemes not to pay bonuses (cash or otherwise) to executive directors and senior management”. Stock-based long-term incentive plans should be scaled back, Fidelity says, and salaries for senior management should be frozen or increased only modestly.
The Sunday Telegraph reports on the challenges ahead for Britain’s automotive sector, with Covid and Brexit stunting production to 1984 levels the industry faces tough decisions regarding the investments required for the transition to electric vehicles. Andrew Burn, head of automotive at KPMG says CEOs of carmakers are likely to put off investments in the near term, adding: “Manufacturing in the UK is down to government’s appetite for it. Does it support it or not?”
The Sunday Telegraph, Business, Page: 7
SMEs NEWS – WEEKEND TO 28TH FEBRUARY 2021
Business leaders alert to task force transition
The Sunday Times speaks to businesses about the Brexit transition, with some expressing concern about Lord Frost replacing Michael Gove as chair of the Brexit business task force, suggesting his “sovereignty-first” ethos may put business second. Mike Cherry, the national chairman of the Federation of Small Businesses, comments: “Against a backdrop of continued trading restrictions, we need to see policy-makers pulling out all the stops to both introduce additional easements for small firms where the EU-UK deal is concerned and strike fresh deals with nations outside the bloc.”
Laura Miller in the Sunday Times looks at how the pandemic has widened the pension gap, with women more likely to have lost their jobs in the first lockdown. Kate Smith, the head of pensions at Aegon, comments: “There’s no escaping that Covid is widening an already extensive gender pension and savings gap.” Miller also touches on how maternity leave has affected pensions, with analysis from Aegon showing that women who had paused their pension saving for two years while on maternity leave and then reduced their hours had up to £50,000 less in their pot when it came to retirement.
Tom Knowles considers the threat to jobs from automation in the Times and reviews the book Futureproof: 9 Rules for Humans in the Age of Automation by Kevin Roose. The New York Times journalist argues that all types of AI are advancing so fast and appearing in so many fields that the only way humans will thrive and hold on to their jobs is to become more human rather than trying to compete directly with machines. “Most of the promising applications of AI and machine learning are in fields like accounting, law, finance and medicine, which involve lots of tasks like planning, prediction and process optimisation.” the book states. Knowles notes a study showing that accountants have a 99% chance of being automated, while solicitors and financial analysts are also in trouble. The less exciting AI is largely overlooked, Roose says, but we “underestimate boring bots at our peril”.
Downing Street hesitates over audit reform after bosses’ backlash
Proposals to hold directors responsible for inaccurate accounts have led to a backlash from business leaders who argue the move would stifle innovation and harm inward investment. The proposals form part of a series of reforms designed to improve audit standards that were recommended following three independent reviews. Legislation is needed to implement many of the proposals, including replacing the Financial Reporting Council with a tougher watchdog called the Audit, Reporting and Governance Authority and having the Big Four ensure their audit and consulting arms are independent. Delays in passing the law are frustrating the accounting sector with ICAEW chief Michael Izza saying: “We seem to be mired in treacle.” Now, the business community is hitting back at the crackdown on directors, rattling Downing Street and as a result, the audit reforms are said to be still awaiting the prime minister’s sign-off.
The Times carries news that Ron Kalifa is urging the Government to establish a high-profile taskforce to lead innovation in financial technology as part of the UK’s growth plans after Brexit. Mr Kalifa, the former boss of the payments processor Worldpay, was asked by the Treasury to review the sector in July. The Chancellor said yesterday that the review “will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs and deliver better financial services for people and businesses.” Rachel Kent, a partner at Hogan Lovells Financial, who led some of the work for the report, said: “While the UK’s position is well established its future is not assured. Being outside the EU has created an opportunity to re-examine and reshape our regulatory framework to ensure it remains attractive and enabling to fintechs.”
Carney’s green boasts highlight need for ESG audits
The former Bank of England governor has been accused of using an unrecognised and widely discredited definition of “net zero” to promote the green credentials of Brookfield Asset Management, the Canadian investment company he joined last year. The Times’ Patrick Hosking suggests Mark Carney has inadvertently drawn attention to the problem of ESG auditing: “Auditors pore over claims made for companies’ finances and there is still fraud and rule-bending. Why would unaudited environmental boasts be more reliable or honest?”
The Chancellor is set to funnel a further £126m into training and apprenticeship schemes in his Budget on Wednesday. Rishi Sunak said it was “vital” support continued to get people back into work. Currently, firms in England are given £2,000 for every new apprentice they take on under the age of 25, and £1,500 for those over 25, in addition to a £1,000 grant they are already getting under another project. The Government’s planned investment could therefore enable a further 40,000 traineeships.
Boris Johnson: Remote working won’t be the new normal
The Prime Minister has said in only a few months people will be commuting back into the cities and returning to their offices to work. Boris Johnson dismissed fears that Britain is facing a new age of remote working claiming in a video message that, as the economy reopens, “the British people will be consumed once again with their desire for the genuine face-to-face meeting.” The PM’s comments come after Goldman Sachs boss David Soloman rejected remote working as the new normal and labelled it an “aberration”.
PERSONAL FINANCE NEWS – WEEKEND TO 28TH FEBRUARY 2021
264,800 Help to Save accounts opened
More than 264,000 individuals have opened a Help to Save account and could be earning money on their savings, statistics from HMRC have revealed. Help to Save is the Government backed savings scheme that allows individuals to earn a 50 pence bonus for every £1 saved over four years. The 50% bonus is payable at the end of the second and fourth year and is based on how much account holders have saved.
PROPERTY NEWS – WEEKEND TO 28TH FEBRUARY 2021
Treasury to introduce mortgage guarantee scheme
The Chancellor will outline a new scheme on Wednesday that will see the Government guarantee part of a 95% mortgage for first-time buyers, up to a property value of £600,000. Banks are expected to have capacity to lend to about 3,000 individuals a month under the scheme. First-time buyers accounted for just 31% of all sales last year – the lowest proportion since 2016.
The Chancellor is to launch a £100m taskforce to crack down on Covid fraud. Based in HMRC, the new Taxpayer Protection Taskforce will focus on tracking down the criminal gangs thought to have stolen billions of pounds by posing as legitimate businesses.
Daily Mail, Page: 2
ECONOMY NEWS – WEEKEND TO 28TH FEBRUARY 2021
Government borrowing costs rise as inflation fears grow
Yields on US and UK government bonds rose yesterday hitting one year highs and driving further the worldwide equities sell-off. The FTSE 100 dropped 2.5% while the Cac 40 and the Dax were also off by 1.5% and 0.8% respectively as concerns about inflation grow. “In the short term, volatility is likely to persist, and yields may rise further still,” said Salman Ahmed, global chief investment officer at Fidelity International. “However, while further rises in real rates and tightening of financial conditions may be needed before any real action is taken by central banks, we are closer to a turning point than a week ago.”
Hospitality firms have warned that one in five businesses in the sector could run out of cash in the next week unless more emergency support is confirmed. In a letter to the Government, signed by companies including Carlsberg, Intercontinental Hotels, pub chain Wetherspoons and Legoland owner Merlin Entertainment, they warned they faced a “truly perilous” situation with months of continued restrictions ahead. The letter said: “There is a significant gap between the current support provided by the government and the fixed outgoings associated with a closed hospitality business.”
Sunak to pledge £5bn in grants for the high street
In his Budget on Wednesday, the Chancellor will announce a £5bn fund to help high street pubs, restaurants and non-essential shops that have remained closed as a result of the Covid lockdown. Nearly 700,000 companies will be eligible for new direct cash grants of up to £18,000. Rishi Sunak said on Saturday night: “Our local businesses have been hit hard by the pandemic, which is why we went big and went early with a multi-billion pound package of support. There’s now light at the end of the tunnel, and this £5bn of extra cash grants will ensure our high streets can open their doors with optimism.” Craig Beaumont, chief of external affairs at the Federation of Small Businesses, heralded the “significant cash injection”, which he said would “help thousands of businesses survive through these final restrictions, and then help drive the vaccine-enabled recovery”.
INTERNATIONAL NEWS – WEEKEND TO 28TH FEBRUARY 2021
US removes stumbling block to global deal on digital tax
Janet Yellen, the US Treasury secretary, has told G20 finance ministers the US will remove the “safe harbour” requirement from proposals for global digital taxation reforms, potentially unlocking long-stalled multilateral negotiations at the OECD. The measure, which Donald Trump’s administration insisted on in 2019, would permit US tech companies to opt out of having to pay such taxes abroad. The German finance minister Olaf Scholz said Ms Yellen’s statement was a major breakthrough.
The former King of Spain, Juan Carlos, has made a payment of close to €4.4m (£3.8m) in unpaid taxes to Spain’s authorities in a move designed to avoid an embarrassing lawsuit. It is the second settlement Juan Carlos has paid in less than three months. Under Spanish law, someone cannot be prosecuted for tax offences if they settle an outstanding debt before formal charges are brought.
With Rishi Sunak believed to be considering tax increases as he looks to boost public finances that have taken a hit from the coronavirus crisis, Mark Littlewood, director general of the Institute of Economic Affairs (IEA), has suggested that the Chancellor could use the pandemic to revamp the tax system. Mr Littlewood, musing on whether taxes should be cut or increased to support the economy, said: “My own view is to increase tax in order to deal with the immediate deficit this year might actually be cutting off your nose to spite your face.” Suggesting that “we don’t need to solve the mess in the public finances overnight,” Mr Littlewood argues that the economic hit from COVID-19 could be treated like a war debt, saying that if ministers believe the crisis has delivered a once in a generation shock, “we could realistically pay that off over a generation.” He also says the pandemic could serve as a starting po int to revamp and simplify a system of taxation that is “very complicated” and probably unbalanced. Mr Littlewood goes on to say a reworked system that sees “those with the broadest shoulders … carry the heaviest burden” may hurt growth, warning against a system centred on “drawing all of the enhanced tax revenue from a relatively small albeit affluent part of the population”.
Taxing times for the Chancellor
Philip Aldrick in the Times considers the Chancellor’s options as he looks to fix the nation’s finance in the wake of the coronavirus crisis, arguing that tax will need to rise at some point but debate remains on when. He points to analysis from economists who suggest Rishi Sunak may “wait until the recovery is entrenched before unveiling new fiscal rules”. A Guardian editorial says reports that Mr Sunak is contemplating a radical and redistributive budget that includes steeper taxes for the wealthy “have to be taken with a pound of salt”. Lauren Davidson in the Telegraph says the dent to public finances stemming from the COVID-19 crisis clearly has to be paid for, but raising taxes to the extent some reports claim “is not the way to do it” and is not guaranteed to boost revenues. Juliet Samuel in the Telegraph also muses on mooted tax increases, saying it will be hard as the Tory manifesto ruled out any big increases and Boris Johnson “doesn’t believe in raising taxes”. Merryn Somerset Webb in the FT warns that the taxes discussed as targets for increases “won’t raise enough to touch the sides of the problem.”
Amid ongoing speculation over an increase in taxes being considered by the Chancellor, Conservative MP David Davis has warned that he would be willing to rebel over the content of the Budget. He told BBC Radio 4’s The Week in Westminster: “I’m not exactly the most virtuous person in terms of not voting against my party. But I’ve never voted against a Budget in my life. If it’s a tax-raising Budget I will.”
The Daily Telegraph, Page: 8 The Sun, Page: 2
Investors act on tax shift fears
Harry Brennan in the Telegraph says wealthy individuals are selling off investment portfolios and second homes in fear of tax increases the Chancellor is said to be lining up for his autumn Budget, while others are pumping cash into pensions to take advantage of tax breaks and low rates before changes come into force.
The Daily Telegraph, Money, Page: 1
Can I avoid tax on gifts of over £3,000 to my children?
An FT reader’s request for advice sees Richard Jameson of Saffery Champness offering guidance on a matter related to inheritance tax.
Boris Johnson and the Chancellor have come to an agreement on taxation that will likely mean a hike in taxes in November’s budget, with tax cuts to follow in 2023 or 2024, ahead of the next election. The Sunday Times reports that Mr Johnson is not prepared to sanction rises in income tax, national insurance or VAT, but Rishi Sunak could equalise rates of capital gains tax with income tax and is said to be determined to suspend the “triple lock” on state pensions. Removing higher-rate tax relief on pension contributions is also likely to go ahead in November, the paper says. The Mail on Sunday describes the “fury” of Tory party donors who warn they will “turn off the funding taps” if Sunak hikes taxes on the wealthy to pay for the pandemic while Daniel Hannan in the Sunday Telegraph likens raising taxes to a second trauma for an economy already in a coma. Finally, the Observer&rs quo;s business leader says the time for “a big tax-raising budget has not yet arrived” and that, if anything, “the reverse is needed – an expansive budget with an increase in funding to protect the jobs of millions of workers. Concerns over the national debt should be sidelined.”
A letter published in the Sunday Times calls for reform of Britain’s property taxes. Signatories including Matthew Lesh of the Adam Smith Institute; Carys Roberts, executive director at the Institute for Public Policy Research, MPs and others assert that: “Replacing council tax and stamp duty with one simple property tax, based on actual property value and people’s ability to pay, will result in a fairer system of taxation for most of us.” They continue: “The government is promising to “level up” Britain. It should make a start by conducting a thorough review of our residential property taxes.”
Paolo Gentiloni, European Commissioner for economics and taxation, told CNBC on Saturday that Big Tech have been the winners from the coronavirus pandemic and that it is time they started paying a fair amount of tax in Europe. “The giants of the digital platforms are the real winners of this crisis, from the economical point of view,” Gentiloni stated. “We all experience this in our own lives.” If negotiations on a proposed new digital tax collapse at the OECD-level collapse by the year-end, the European Commission “will come out next year with our own a proposal,” Gentiloni said.
Tax hikes would damage City of London, warns private equity veteran
City veteran Jon Moulton has warned that tax rises proposed by the Treasury would only benefit rival financial centres such as New York or Singapore, as London-based entrepreneurs with in-demand skills would be lured abroad.
The Telegraph reports that Chancellor Rishi Sunak is set to ignore calls to create a state-backed organisation that would refinance toxic business loans handed out as part of coronavirus support initiatives. Proposals put together by a taskforce led by trade body TheCityUK and EY would see the Government take responsibility for debts, easing the burden on banks. Lloyds chairman Norman Blackwell has warned that bankers will be expected to do “everything they can” to recover toxic coronavirus loans, with firms possibly put into administration or assets being sold off. Lord Blackwell suggested that “the best thing” for firms that remained viable would be to “take the loans off the banks, pay out their guarantee and put them in a vehicle which will over time try and recoup money from the companies.”
Thirteen people are being sued in connection with an alleged fraud at London Capital & Finance, where administrator Smith & Williamson claims almost 60% of investors’ cash was channelled to executives. The investment firm collapsed last year when the Financial Conduct Authority said it was misleadingly promoting high-risk bonds. The scandal is the subject of an investigation by the Serious Fraud Office, while a separate regulatory probe is looking at EY, PwC and Oliver Clive & Co, LCF’s accounting firms.
Mike Ashley’s Frasers Group says Debenhams’ advisers are blocking it from rescuing the retail chain due to a gagging order preventing it from talking to landlords. CFO Chris Wootton said Frasers is not formally involved in the sale because it refused to sign a nondisclosure agreement that would prevent it from talking to Debenhams’ landlords for 18 months. The Times cites a source close to Debenhams who points to concern that Frasers could use confidential data to strike separate deals for Debenhams’ best stores with landlords – with Debenhams’ administrators at FRP saying this would reduce the value of the business for creditors.
Nationwide Accident Repairs group has been partially rescued by Redde Northgate in a pre-pack administration led by PwC. Under the terms of the deal, Redde Northgate will buy 77 of the company’s 102 bodyshops and a fleet of mobile repair vans for up to £16m. The deal saves around 2,300 jobs.
The Times, Page: 55
Fraud hit THG float
The Hut Group, an e-commerce company that this week announced plans for a £4.5bn float, cancelled a stock exchange listing planned for 2011 when auditor PwC discovered a multimillion-pound fraud.
The Guardian, Page: 37
The City is prone to group-think, too
Oliver Shah considers how Japan’s corporate culture helped to enable the Olympus scandal and the reaction of the German establishment to the Wirecard fraud, asserting that both countries appear better able to reflect on their failures than the UK, where the prevailing attitude in the City to those burnt by fraud is simply: “Caveat emptor, mate — hard luck.”
Duff & Phelps has been hired by Thai restaurant chain Busaba to handle its CVA as the business looks to restructure. Busaba has 13 restaurants and 350 staff and plans to close one restaurant permanently. Five others will stay closed until it is viable for them to reopen, and seven will keep trading.
Jessica Beard in the Telegraph expresses concern that a mooted cull of higher-rate pensions tax relief could leave more than half a million workers at risk of being charged “double tax” on retirement savings. Noting that Chancellor Rishi Sunak is considering cutting relief from 40% for higher-rate taxpayers to a flat rate of 20%, she argues that reform would see higher rate taxpayers who remain in the upper bracket after they retire receive 20% tax relief on pension contributions during their working years but charged a 40% tax rate in retirement.
The Daily Telegraph, Money, Page: 3
Case for pensions tax rise to aid Covid recovery
Paul Johnson, head of the Institute for Fiscal Studies, has told the Treasury Select Committee there is a case for “at least a modest increase” in tax on pensions in payment.
The Sunday Telegraph reports that savers who want to transfer out of their final salary pensions will struggle to do so in future, with nearly half of all advisers unsure if they will still be in the market in a year’s time. A report by Royal London and Lane Clark & Peacock reveals advisers are concerned they will no longer be able to afford the costs and risks of transfer advice. It comes after the Financial Conduct Authority stepped up its efforts to stamp out poor advice and raise awareness of the risks of switching to more flexible pension schemes. From October 1, firms will no longer be able to offer “contingent” charging models and this ban will prompt a fresh wave of advisers to flee the market, the report warned. The Personal Finance Society has urged the Government to consider a temporary, state-backed alternative to indemnity insurance to ensure advisers are not squeezed on costs.
The Sunday Telegraph The Mail on Sunday, Page: 104
TECHNOLOGY NEWS – WEEKEND TO 6TH SEPTEMBER 2020
Tech has potential to be the engine of our economy for years to come
Tony Spillett, tax partner and UK head of technology and media at BDO, writes in the Sunday Times on how the UK’s technology sector has emerged faster and stronger from lockdown than most other areas of the economy and calls for a boost to the UK’s innovative reputation, “which must be enabled rather than impeded by Brexit.”
The Sunday Times, Tech Track 100, Page: 6
INSOLVENCY NEWS – WEEKEND TO 6TH SEPTEMBER 2020
Fall in insolvent business debt
A report from Red Flag Alert shows that the coronavirus crisis led to a drop of £189m in insolvent business debt during the last quarter, with total insolvent business debt at £1.577bn at the end of June, down 10.7% from £1.766bn at the end of March.
Yorkshire Post, Page: 24
EMPLOYMENT NEWS – WEEKEND TO 6TH SEPTEMBER 2020
CBI boss urges UK Government to adopt new jobs support scheme
CBI boss Carolyn Fairbairn has said the Government needs a successor to its furlough scheme as she warned against a rise in corporate taxes, calling instead for an extension of business support schemes. Ms Fairbairn’s comments come as MPs from across the political spectrum call for the Chancellor to introduce a more targeted support scheme to help the areas hardest hit by COVID-19 – particularly, hospitality and the media and creative industries.
Rise in minimum wage ‘unaffordable’ after pandemic
The Sunday Telegraph reports that certain members of the Low Pay Commission are warning that Britain will not be able to afford a planned increase in the minimum wage due to the coronavirus pandemic. The rate was expected to rise from £8.72 to £9.21 per hour in April but experts now believe the pay hike could now be unaffordable for many companies and result in increased unemployment.
The Times’ Jessie Hewitson says that while the Treasury has “radically pruned” the tax breaks available on most mainstream investments, holiday homes are the one money-making venture that lets an investor potentially avoid the “accounting holy trinity” of income tax, capital gains tax and inheritance tax. Heather Powell from Blick Rothenberg says some investors are opting to convert their buy-to-let properties to holiday lets.
Prominent technology investors have urged start-ups to return to offices, voicing concerns that continued working from home could harm their productivity. Brent Hoberman, co-founder the firstminute Capital investment fund, said: “I think it’s going to be very detrimental if we keep people apart and we lose the team spirit and learning by osmosis that happens in offices”. Tim Levene, CEO of venture capital business Augmentum, has called on CEOs to “recognise that we cannot continue to operate as we have been these past few months,” warning of dangers to the mental health of start-up employees if they continue to work from home.
Small Business Commissioner Philip King has written to large businesses warning them that if they reduce the credit they make available to small suppliers many SMEs will go bust. Mr King urged small businesses to get in touch with his office if they are experiencing late payment problems and said that many of the companies he has written to promptly paid up.
Sunday Express, Page: 43
ECONOMY NEWS – WEEKEND TO 6TH SEPTEMBER 2020
BoE policymaker: Further QE may be needed to hit inflation target
Senior Bank of England (BoE) policymaker Michael Saunders has warned an economic recovery could stall, pushing the Bank to increase quantitative easing measures. Mr Saunders, who votes on interest rates as a member of the Bank’s Monetary Policy Committee, voiced concern that the end of the furlough scheme will drive an increase in unemployment, while the initial boost from lockdown measures being eased could subside. While the economic rebound has recently exceeded BoE expectations, Mr Saunders said: “I would be cautious about extrapolating much from this apparent outperformance.” He also said he suspects that government support measures – such as the job retention scheme, tax payment deferrals, and mortgage holidays – “turned out to be more powerful than expected in supporting household incomes and spending.” Mr Saunders thinks it is “quite likely” that additional monetary easing will be required for inflation to see a “sustained re turn” to the 2% target.
Stress test reveals potential blow to borrowing cost
Stress tests by the Treasury show that if the interest rate were to increase from 0.2% to 1%, the Government’s borrowing costs would be driven up by between £30bn and £40bn a year. The Telegraph says the analysis is likely to prompt calls for the Bank of England to continue with quantitative easing, which is currently only guaranteed until the end of the year.
Pubs and restaurants help economy to 6% growth in July
Figures due out on Friday are likely to show Britain’s economy grew by 6% in July compared with June with GDP bolstered by the re-opening of pubs, restaurants, hairdressers and other services from the beginning of the month. The EY Item Club expects economic growth to have continued in August thanks to the Eat Out to Help Out scheme, but Howard Archer, the group’s chief economist warns: “The big question mark is what happens in the fourth quarter. There is only so much pent-up demand and with the furlough scheme coming to an end we can expect job cuts, the scale of which is a big unknown.”
The Mail on Sunday, Page: 98
Remote working will cost Britain £15bn a year
A report by PwC warns that the economy could be dealt a £15.3bn blow every year due to impact of remote working on cleaners, coffee shops and security guards. Jonathan Gillham, PwC’s chief economist, said that while suburbs and smaller towns stood to benefit from home-working, the overall economy would suffer because of the impact on bigger cities such as London and Manchester.
Monzo has capped the amount of cash that customers can withdraw without incurring a fee at £250 amid concern over the digital bank’s financial health. Customers will be charged a 3% fee for withdrawals over this amount. Auditors at EY warned of “significant doubt” over the bank’s ability to operate as a going concern because of the uncertainty caused by COVID-19.